BILL NUMBER: S9043
SPONSOR: GOUNARDES
 
TITLE OF BILL:
An act to amend the tax law, in relation to providing a cost of living
adjustment to income taxes
 
PURPOSE OR GENERAL IDEA OF BILL:
To re-index New York's personal income tax brackets and standard
deduction to inflation, as it was from 2011 to 2016.
 
SUMMARY OF PROVISIONS:
Section one of this bill amends clause (viii) of subparagraph (B) of
paragraph 1 of subsection (a) of Section 601 of the Tax Law to index the
dollar amounts for personal income. tax (PIT) brackets for married
filing jointly filers for tax years 2027 through 2032.
Section two of this bill amends clause (ix) of subparagraph (B) of para-
graph 1 of subsection (a) of Section 601 of the Tax Law to index the
dollar amounts for PIT brackets brackets for married filing jointly
filers for tax year 2033 onwards.
Section three of this bill amends clause (viii) of subparagraph (B) of
paragraph 1 of subsection (b) of Section 601 of the Tax Law to index the
dollar amounts for PIT brackets for head of household filers for tax
years 2027 through 2032.
Section four of this bill amends clause (ix) of subparagraph (B) of
paragraph 1 of subsection (b) of Section 601 of the Tax Law to index the
dollar amounts for PIT brackets for head of household filers for tax
year 2033 onwards.
Section five of this bill amends clause (viii) of subparagraph (B) of
paragraph 1 of subsection (c) of Section 601 of the Tax Law to index the
dollar amounts for PIT brackets for single and married filing separately
filers for tax years 2027 through 2032.
Section six of this bill amends clause (ix) of subparagraph (B) of para-
graph 1 of subsection (c) of Section 601 of the Tax Law to index the
dollar amounts for PIT brackets for single and married filing separately
filers for tax year 2033 onwards.
Section seven of this bill amends Section 601-a of the Tax Law to re-in-
dex dollar amounts for PIT brackets, benefit recapture tables, and the
standard deduction to a cost of living adjustment (COLA) based on the
Consumer Price Index for All Urban Consumers (CPI-U) published on an
annual basis by the US Department of Labor. "Benefit recapture" as
provided in subsections (d) through (d-7) of Section 601 of the Tax Law
means that the top tax rate is applied to all of a filer's income if the
income exceeds the top tax threshold rather than only to the portion of
the income that exceeds such threshold.
This section further provides that for tax years beginning in 2027, if
the COLA results in a number that is not a multiple of fifty dollars,
the number shall be rounded up to the next highest multiple of fifty
dollars.
Section eight of this bill amends Section 614 of the Tax Law to codify
the current standard deduction amounts for single, married filing joint-
ly, head of household, married filing separately, and single dependent
filers. This section also provides that for tax years beginning in 2027,
the standard deduction amount shall be indexed to inflation.
Section nine sets the effective date.
 
JUSTIFICATION:
As of this writing, 17 of the 32 states with graduated-rate personal
income taxes index . their brackets to inflation, as does the federal
government. 1 Of the 31 states that offer a standard deduction, 20 plus
the District of Columbia index this tax expenditure to inflation. 1 New
York indexed both its brackets and its standard deduction from 2011
through 2016 but then suddenly stopped, leaving the Empire State as one
of only 12 across the country to subject its residents to a hidden
inflation tax.
Unindexed tax systems burden taxpayers in multiple ways. Firstly, they
subject filers to "bracket creep," where an ever-greater share of income
is subject to higher taxes despite only nominal gains in income. This
might happen when a taxpayer gets a raise at work, for example, which
pushes them into the next highest PIT bracket, even if the raise was
only enough to offset inflation. The worker has not experienced any kind
of real increase in purchasing power since prices have also gone up, but
they owe more money to the state nonetheless.
While subtle and so largely unnoticed, the data shows that bracket creep
can have a dramatic impact on low and middle-income households as it
compounds over time. So long as deductions and bracket thresholds are
not updated in one year, for example, the next year will lag two years
behind the real value of the taxpayer's dollar, and so on and so forth.
2 This lag hits low- and middle-income filers the hardest, as a failure
to index brackets affects all taxpayers above the first bracket and not
already in the top bracket. One study found that households with $25,000
in income in 2016 with a 5% annual nominal wage growth (a generous
growth rate) still lost $1,015.13 to bracket creep by 2023. The same
household at $50,000 would lose $915.74. A higher income household at
$150,000, however, would lose only $691.19 , more than $300 less than
the lowest income household.2 Seen another way, the CPI for the North-
east Region rose 15.29% from December 2020 to December 2023 after
pandemic-related recovery efforts led to the highest inflation rate in
decades. Had New York tax brackets been indexed to this rise in prices,
bracket thresholds would have risen by 15.29% during this time period as
well.
Bracket creep and declining purchasing power hits low-income taxpayers
in three other ways as well. As low income households' assets tend to
take the form of cash rather than stocks, bonds, precious metal, crypto-
currency, or real estate, their net worth doesn't grow alongside
inflation like their high income counterparts'. Secondly, low and middle
income earners spend a greater portion of their income on expenses like
rent, groceries, transportation, and energy that are most impacted by
inflation. Thirdly, inflation that artificially raises wages pushes many
low income filers off a benefits cliff by disqualifying them from
means-tested social services and tax breaks virtually overnight.
Inflation also degrades the value of static tax credits, deductions, and
exemptions, like New York's child tax credit and standard deduction,
neither of which are adjusted for cost of living. New York's tax code is
doubly insulting to working families, who are more reliant on these tax
credits than their wealthy peers, as it erodes the value of their tax
breaks white pushing them into a higher bracket. One study showed that
from 2016 to 2023, for example, single filers received $63,950 from the
standard deduction, but had it been adjusted for inflation, they would
have received $71,211 over this time - a difference of $7,261. For many
a taxpayer, that kind of cash flow may have meaningfully impacted their
ability to keep a roof over their head or put food on the table.
Finally, the lack of inflation indexing in our tax code is deeply undem-
ocratic, as it amounts to a tax increase that no lawmaker ever had to
vote on. As one study notes, "(t)he erosion in value happens automat-
ically, betraying the principle of democratic lawmaking in which voters
have a say in tax rates through the election of their representatives.
This effective tax increase occurs without any corresponding increase in
the quality or quantity of public goods and services, exacerbating
taxpayer dissatisfaction."2
This bill would re-index New York's PIT brackets and standard deduction
to CPI-U starting in tax year 2027, following the lead of the vast
majority of other states with comparable tax systems as well as the
federal Internal Revenue Code. It acknowledges that our tax code must
once again reflect changes in cost of living, as it did as recently as
ten years ago, while ensuring tax benefits flow to those who need them
most. This is a progressive, deeply rational bill that would help miti-
gate our state's affordability crisis by ensuring that taxpayers are
able to keep more of their hard-earned money.
 
PRIOR LEGISLATIVE HISTORY:
None
 
FISCAL IMPLICATIONS:
TBD
 
EFFECTIVE DATE:
This act shall take effect immediately.
1 Walczak, Jared. "Inflation Adjusting State Tax Codes: A Primer." Tax
Foundation, 29 Oct. 2023,
taxfoundation.org/researchtall/statetinflation-adjusting-state-tax-
codes/ _ftn1. Accessed 19 Jan. 2026.
2 Dreyer, Paul, et al. Eliminate the Hidden Inflation Tax: Why New York
State Should Index Taxes to Inflation. The Manhattan Institute, Aug.
2025.

Statutes affected:
S9043: 601 tax law, 601(a) tax law, 601(b) tax law, 601(c) tax law